ECB to push ahead with green monetary policy shakeup

January 24, 2023|Written by David Clarke|Securities & Exchange Commission, World Bank, Bank of England, European Central Bank

ECB considers corporate bonds shift, SEC climate rule due in April, and more from this week in green central banking.

ECB corporate bond changes could reduce carbon footprint

The European Central Bank (ECB) has confirmed it is still considering a shakeup of its €345bn portfolio of corporate bond investments to favour more climate-friendly companies, despite winding down its purchases of new bonds.

“It would be misleading to use tighter financing conditions as a scapegoat for further delays in the green transition,” executive board member Isabel Schnabel said recently.

Meanwhile a new study has found the ECB could cut the carbon footprint associated with its corporate bond holdings by 87% if it sold just €48bn of debt from the 25 top polluters.

Analysis from the Anthropocene Fixed Income Institute thinktank found that the carbon footprint associated with the ECB’s bond holdings are highly-concentrated in a small number of companies.

It said the ECB’s decision would represent a welcome “paradigm shift” in favour of and cited Shell, Total and Repsol as among the companies likely to be most significantly affected by the move.

SEC climate rule due in April

The climate disclosure regulations from the US Securities and Exchange Commission (SEC) are now scheduled for release by April, Reuters has reported.

The rule was initially due to be completed last year but has been delayed amid fierce attacks from corporate lobbyists and right-wing lawmakers. A draft version released in March 2022 included a requirement for large businesses to report on carbon emissions throughout their supply chain.

The SEC has been said to be considering abandoning some of its key provisions, despite the fact that the proposals enjoy significant support among investors.

World Bank reform plans criticised

Reform plans prepared by staffers at the World Bank have been criticised for failing to integrate climate concerns throughout the institution’s activities.

A 20-page “evolution roadmap” was leaked earlier this month, and the World Bank confirmed this week that the proposals are currently under discussion by its senior management.

The document proposes that the bank should have a new mission which “emphasises the importance of sustainability and resilience to reflect more clearly that our mission includes global public goods, such as climate change”.

A response from the E3G climate thinktank says the plans are overly reliant on an increase in the amount of capital put forward by donor governments, which it says is unlikely to be forthcoming in the near future.

Instead, it says the World Bank should be honest about the level of lending and activity that is necessary to address global development challenges, and then “negotiate with donor governments from a position of high ambition”.

Joe Thwaites and Jake Schmidt from the National Resources Defense Council said that “simply calling for more funding is not the answer”, and that the bank should integrate climate concerns throughout its work and ensure all its funding is aligned with the Paris Agreement’s goals.

“Creating trust funds suggests they still see climate as a niche interest rather than the central development and security challenge of the 21st century,” they argued.

Invest in climate to boost economy, says BoE’s Mann

A senior Bank of England (BoE) official has said government measures to fight climate change can support productivity and the wider economy.

Catherine Mann, who sits on the BoE’s monetary policy committee, said that a clear climate strategy can promote both demand and supply in the private sector.

Lord Nicholas Stern, chair of theGrantham Institute at the London School of Economics, struck a similar tone in a paper for the World Economic Forum, writing that “the new, technology-driven, sustainable growth story represents the greatest investment opportunity since the industrial revolution”.

He said public-private partnerships in policy, innovation and finance are essential in order to mobilise a necessary global increase in investment of around 2-3% of GDP. He said such an increase is possible because there is currently “no constraint” on global savings.

This page was last updated January 23, 2023

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